Recent reductions in the annualized benchmark interest rate (Selic) have made Brazilian market analysts more optimistic about the prospects of a steeper decline over the course of the year.
According to last Friday’s, March 17, Brazil’s Central Bank (BC) survey of private sector economists, the expectation is for the current annualized rate of 16.50% to fall to 14.38% by the end of 2006. In the previous week’s survey, their prediction for the year-end rate was 14.50%.
According to the Focus Bulletin, released this Monday, March 20, by the BC, this decrease reflects a general view that, at its April meeting, the Monetary Policy Committee (COPOM) will reduce the Selic by another 0.75 percentage points, as it has done at its last two meetings. The analysts also lowered their forecast for the interest rate in 2007 from 13.38% to 13%.
The BC survey is conducted weekly to assess tendencies in the chief economic indicators. Based on the views of the analysts who were interviewed, the market has not modified its outlook in any significant way since the previous survey, and everything points to a US dollar worth R$ 2.20 at the end of this year, with the possibility of climbing to R$ 2.40 by the end of 2007.
The projections continue to indicate a US$ 40 billion trade surplus (exports minus imports) this year and a US$ 35.5 billion surplus next year. The current account surplus, which includes all the country’s commercial and financial transactions abroad, is expected to be around US$ 9 billion this year, while the forecast for next year’s surplus rose slightly, from US$ 4.5 billion to US$ 4.56 billion.
The Focus Bulletin upped its projection of this year’s industrial growth from 4.10%, last week, to 4.11%. Regarding this year’s growth in the Gross Domestic Product (GDP), the total of all wealth produced in the country, the forecast stood unchanged at 3.5%.
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